Using a self-managed super fund for property investment 

Around 1.1 million Australians have an SMSF. Is using one to buy property right for you?

A group of friends discussing using their self-managed super fund to finance property investments

Superannuation and investment properties

If a self-managed super fund (SMSF) is right for you, one of your main decisions is where to invest. Property is one option, and you can do this in two ways.

You might be able to buy a property outright without borrowing money if your SMSF has the funds. But the property must be part of an investment strategy to fund your retirement. Or your SMSF may be able to take out a loan to buy an investment property.

Loans taken out by SMSFs are called “limited recourse”. This means if your fund defaults on the loan it can’t sell the other assets in your SMSF to pay back the loan, which could mean a  higher risk for lenders. SMSF loans can have a higher interest rate and have more fees than regular investment loans.

Not all lenders offer SMSFs non-recourse loans. Finding the right loan to fit your investment strategy is an area where an Aussie Mortgage Broker can help.

Buying property through a self-managed super fund

It’s important to weigh up some issues to decide if investing in property through your SMSF is right for you.

  • How much can you borrow? Loan to value ratios (LVRs) are typically lower for SMSF property investments, so you’ll need the funds to cover the deposit and upfront purchase costs.

  • Do you have enough cash flow? Will the property make a profit or loss? SMSFs generally pay 15% tax on net income, which is great if the property earns a profit. But you can’t transfer those losses to your personal income to save on tax if it makes a loss.

  • Read the fine print? SMSF loans can’t be used to pay for renovations that increase the property’s value, these works can be funded by money already in the fund and not borrowed money. Be sure to choose the right loan and property from the start.

Work with experts to decide what’s right for you

SMSF lending is complex. So, it’s essential to use a mortgage broker, accountant, financial planner and solicitor or conveyancer who understand SMSF property purchases.

Your SMSF-approved Aussie Broker can help you find the right loan for you when investing in property through an SMSF.

Speak to an Aussie Broker 

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